Lack of legacy helping the country leapfrog, says Nandan Nilekani

India is in a position to leapfrog in a way that was never possible before and the lack of legacy is helping us," said Nandan Nilekani, cofounder of Infosys, pithily summing up the point his co-panellists were hammering in.

A high-profile panel debating the topic 'India First: Forging a winning habit' at the ET Startup Awards 2016 delivered precious nuggets of wisdom and insights, emphasizing that doing business has become much easier and entrepreneurs should take advantage. Edited excerpts:

Economic Times: [To Nandan Nilekani] As startup success stories go, Infosys and, indeed, the outsourcing industry, are the stuff of legend. Are there lessons you think will help recreate such an atmosphere in today's startup environment?

Nandan Nilekani: There are many things. For example, the fact that you need to have a long-term vision of what you want to do with the company; that creating and growing a company is a marathon, not a sprint; that you need a set of founders who are committed to a common vision of the future and good strategy, good governance, good management of money.

This (present) world is very different— much faster, much more dynamic. But there are definitely lessons that can be learned from the earlier generation of companies.

ET [To Amitabh Kant]: The role of government is being seen as even more important now with the startup focus so heavily on the domestic market. The government was seen as a huge enabler for the outsourcing industry's success. What do you see as similar aspects that the government could create for this generation of startups?

Kant: If you want to sustain this (startup) movement over a long period, the government must become a very big destructionist.

It must disrupt the education system of India. One of the things we are trying to do is create tinkering labs in schools—500 this year itself.

Create many more incubation centres across universities. Second, I think you need much more funds to flow in. Therefore, the government started a fund-of-funds, which is actually privately managed through (Small Industries Development Bank of India) so that we can have many more venture funds that can be supported.

Third, we must ensure that failure is not a stigma in India because innovation and risk-taking necessitates some amount of failures.

The new Bankruptcy law, the new Company Law Tribunal, all these will help us to ensure that if you have a failure it will be very quick... That is institutionally a very big step that the government has taken.

ET: Bhavish [Aggarwal], companies like yours are facing regulatory roadblocks as well as competition from larger rivals with deeper pockets. Is there something you believe India can do to set an example on the policy front, for companies and the business that you are in?

Aggarwal: Our philosophy has always been that India is a land for creative opportunities, not disruptive opportunities only, because in India—and this is an opportunity for entrepreneurs of my generation— we do not have legacy infrastructure.

So it is with that philosophy we always go into something and try and partner with the government rather than attack the government or attack past legacies. If you study the real issues in our industry, specifically, it is not as if it is a question of intent.

It is a question of structure. Transportation is a concurrent subject, states need to legislate, the Centre needs to legislate.

There is a lot of legacy in transportation.

For example, the Motor Vehicles Act is a 1939 law. There are multiple things that have changed since then.

ET: Sachin [Bansal], there is a lot of work being done in terms of creating new regulations that attempt to address and make business easier for (the online retail industry). What would you like to see on the policy front?

Bansal: Startups need three things right: They need talent, capital and the market. They need access to the market. Lot of times, access to market is blocked either because of regulations or infrastructure bottlenecks.

As Bhavish said, we do not have the legacy infrastructure that existed in Western markets. We are creating from scratch a lot of things and that is very critical. But we sometimes run into regulatory challenges.

To give an example, I will speak on behalf of Bhavish here, one big problem that we are facing in Bengaluru is traffic and one of the big solutions to the traffic problem is buses.

But there is a law in Karnataka that does not allow anybody to compete with the local BMTC (public bus service) and that is a big problem. About 45% of Bengaluru traffic goes on 7,000-8,000 busses, so that is a huge opportunity.

We should allow private players to take that opportunity. It is a multibillion dollar opportunity that companies should have access to.

In pic: Uber Asia head of business Eric Alexander makes a point as Ola CEO Bhavish Aggarwal listens

ET: Kunal [Bahl],do you think there is a role for India to set an example that can be replicated in other markets?

Bahl: I have a slightly different view on this.

I feel Indian entrepreneurs and investors in Indian companies have been given the opportunity of a lifetime. When we were starting our company eight-nine years ago, when we would go to ask for money people would say, 'yes, Rs 5 lakh, but give us 70% of your company.' It was an okay deal.

A lot of people would not be as shocked about it as they are today. A lot has changed for the positive, significantly driven by entrepreneurs, by investors, and because of government initiatives and the inspiration that people such as Mr Nilekani have given us.

I feel there will always be things we can make better through regulations, but India is far easier to do business in [today] than 25 years ago, and we must make use of that.

ET: Ajit [Isaac], your company is a great example of having made use of the opportunityand going the full cycle to a spectacular IPO. What is the one lesson that you think has served you well in this entrepreneurial journey?

Isaac: For us, the key aspect that has helped us through the process of growth is our team.

Our senior team has been with us for the past 10 years or so [there's] consistency of leadership, consistency in the way you think, a dynamic between the leaders... Many investors would ask what keeps you awake in the night and very often I would say it is our culture.

A culture built around the team and the fact that we have been able to keep this culture together for so many years.

ET: Kavin [Bharti Mittal], yours is the newest 'unicorn' on the block and an example of the unique challenges Indian unicorns face. Your competition, for instance, is much larger, has deeper pockets and definitely far more experience. How do you win against odds like that?

Mittal: We have a couple of huge companies we compete with globally, but since day one we have been very clear that we have to just understand the market extremely well. There are challenges with respect to policy as well.

People globally have no problem doing things like encryption on their services but we think twice because the laws are not clear for us. These things do add up slowly and in a startup world like ours, time is everything.

I hope we can be a lot clearer about policy on encryption, privacy and a lot more stuff going forward.

ET: Sachin, you have the same challenges-larger competitors with deeper pockets. How do you deal with this?

Bansal: I think it goes back to us looking for problems that are more Indian, looking at the problems of our customers and coming up with solutions that will work in this market. For that, being super connected to the market, to the consumer base, having your ears and eyes on the ground constantly, and keeping yourself nimble to innovate and to change yourself as time changes is very important.

ET: Ajit, is there a challenge in being able to attract and retain people?

Isaac: When we talk about a million transactions a day or 10 million or let us say 5 terabyte of data every day being generated, and being able to process that, those kinds of challenges just have not been seen...

Not just from a technology point of view but from an operations point of view as well, we do not have enough people who have done that. So we go through a lot of trial and error, making mistakes, learning from those mistakes.

Some talent is coming from outside India who have seen that scale in certain different geographies. But they need to unlearn and learn the Indian ecosystem.

ET: A lot of the debate around Indian startups is about the challenge of execution. But is there scope for strategy formulation as well?

Aggarwal: Strategy and execution have to go hand-in-hand.

Like Sachin said, it starts from a unique understanding of the local customer and local nuances and that is what our learning has been. Many of us who live in urban centres do not realise that India is a very different, very heterogeneous, very diverse market than a Western country and it has very local dynamics that an entrepreneur should leverage.

From that understanding comes strategy and from that comes the local expertise of execution. And execution in India is very different from execution in a Western environment on multiple fronts.

It is not just about lack of infrastructure creating more local innovation opportunities. It is also very hard to find people who understand the scale of internet companies along with Indian uniqueness.

Hence, that becomes the role of the entrepreneur. Then the entrepreneur has to straddle the world between strategy and execution almost on a monthly level.

ET: What do you think are the chinks in the Indian entrepreneurs' armour?

Bahl: Many, actually. I think we are still in the infancy period. I look back last year or the year before. The kind of rudimentary mistakes you were making as a company were quite acute.

Thankfully, we are not making the same mistakes again and again, else we would not be around for very long. I think the chinks in the armour will always be there. The key is to always know where things are going wrong and course correct quickly.

I think the point around culture and people is very-very critical because we do not haveany plants, we do not have any machinery.

Our success, our failure, our speed, our sluggishness is all a function of our people and how galvanised they are.

ET [To Kant]: You meet a lot of entrepreneurs-Indian, global. In your mind, what are the winning attributes of founders who are successful?

Kant: Our innovation cycle has just begun. Quite often, rules and regulations are far behind innovations and we, in the government, need to keep pace with innovation. It is important if we want entrepreneurship to grow.

The important thing for our entrepreneurs is to think really big in size and scale... There are no geographical boundaries. Do not think domestically. The unit-value realisation abroad is 10x. So go and penetrate global markets.

We are going to see a vast number of young entrepreneurs and these people are going to disrupt systems across the world.

ET [TO Nilekani]: You might want to talk about how Infosys did this. It is one thing to say 'think big' and the other is to execute. How did Infosys do it and how did you do this with UIDAI as well?

Nilekani: I think the shift happened when we started planning backwards from an objective or setting a very ambitious goal. That goal could be in terms of revenues or whatever.

What happens is that when you are a small company and say you will be a billion-dollar company in five years, it forces you to re-imagine everything, every aspect of your business, and that makes you take the right decisions.

So think big for a few years down the road and then work backwards... then the strategic architecture, the HR issues, the infrastructure, everything falls into place. The biggest opportunity today is that Indian consumers and businesses will be data-rich before they are economically rich... and that creates an arbitrage.

You are going to be data-rich on the consumer side because of phones, digital payments and all that. You are going to be data-rich on the business side because of the Goods and Services Tax, bill payment systems, Unified Payment Interface.

When you become data-rich before you become economically rich, you have an arbitrage and those who use that arbitrage to create value are going to create trillion dollars of value.

RBI has announced guidelines for account aggregator directions. For the first time in India we have regulators coming out with an architecture for electronic consent, digitally signed for your own data, financial data. This is huge.

It means consumers are now empowered to use data to get a loan, for example. So, you are seeing a massive amount of disruption happening along with UPI and otherthings. So, it is really a huge opportunity.

ET: One of the aspects of culture is being able to spot opportunity and take advantage. For instance, the opportunities that Nandan just listed. How do startups build such abilities in their teams?

​ ​ In pic: Xiaomi India head Manu Jain

Isaac: Spotting opportunities and working on them can come at two levels. One is through the M&A process, where you are looking for assets to buy that can give you additionality by geography or by products for a certain set of services that you do not have. Or alternatively, through a buildout that you will do yourself.

I weigh and see what is cheaper, what is more effective to build or to buy, and then take a decision and balance. We have done nine acquisitions in the last five years and we have figured that every time we do this, there is some new learning.

ET: How much focus do you think is required to inculcate a winning culture?

Mittal: It is not about a winning culture but about a learning culture. Could you build a company that is a learning organisation from day one? You have to build a culture of solving problems and learning.

Can you experiment? If it does not work, there is a system in place to weed out the ideas that may not work.

ET [To Bahl]: Your thoughts on culture.

Bahl: It becomes increasingly hard as head count grows and heterogeneity sets in, when you have call-centre executives as well as PhD data scientists in the company.

How do you build culture when there is such acute heterogeneity in the formation of the organization? That is not an easy one to solve.

What we do is always communicate more and communicate very clearly what is going well, what is not going well and what do we need to do about it.

That tends to work quite well for the most part, for most people.

ET: Nandan, how important is domestic capital for encouraging the growth of startups and entrepreneurship in India?

Nilekani: I think it is very important. Domestic capital will have a very different view on investing.

We are seeing the first generation of entrepreneurs doing it. My (former) colleagues Kris [Gopalakrishnan] and [Mohandas Pai] are examples of this. Indian entrepreneurs who have gone through one cycle are putting back capital and mentorship.

They will understand the nuances of the domestic market. The long-term strategic moat is going to come from understanding local conditions and building capability.

ET: Do you agree, Sachin?

Bansal: If we have to pick up a very large startup ecosystem, internet technology ecosystem, it has to be fuelled by our own domestic capital at some point of time.

Today, we do not have that capital ecosystem so we depend on capital ecosystem from outside.

That ecosystem has a lot of other options... But once a domestic capital ecosystem is developed it will be tremendous for us. [Domestic investors] will connect with the ecosystem. They will bring a very local perspective.

ET [To Kant]: The government has done a lot in terms of creating a fund-of-funds framework. What in your mind can be done to ensure that entrepreneurs are accessing (funds) here?

Kant: I come across a lot of angel investors and I certainly see a huge amount of interest in India.

Lot of rich, famous and elite Indians who never invested in startups suddenly find it very fashionable to invest in startups. In the long run, the government's intention was to see there are many more venture funds.

The objective of this fund-of-funds was that it supports 100 venture funds. They move out, you get another 100 and you should have 10,000 venture funds operating.

ET: You are working on a comprehensive policy for ecommerce. What are you thinking about?

Kant: Innovation is always ahead of government rules and regulations. Government reacts very slowly. Ecommerce is also at a beginning stage.

We are just about $30-40 billion. We should actually be close to $400 billion, $500 billion in five-to-six years. How do we drive that big business? My belief is that ecommerce is just about less than 1 per cent of the total retail market. So we need to drive it with great vigour and energy and what we need to do in terms of policy, in terms of rules, regulations.

ET: You are all high achievers and I am sure everyone would like to know what motivates you. So Kavin, what keeps you going?

Mittal: Once you get those first 10,000-15,000 people using your service and saying"Oh my God! This is incredible," you realize that you have built something that can have an impact on people's lives, it is hard to go back. Since then, the big question was can we do that on a bigger scale?

ET: Kunal?

Bahl: My father was a small business owner. I have seen the pain that small business owners had to face, especially 10-20 years ago.

The opportunity to build a platform that can connect the dots and reduce the information asymmetry that exists in our country... if I can contribute in any small or big way to reduce that asymmetry, I think that is very motivating.

ET: Nandan, you have done this several times over. How do you keep going?

Nilekani: The excitement is that India is now in a position to leapfrog in a way that was never possible before and the lack of legacy is helping us.

We have the technology and the capacity to reimagine every business and government operation. If we do that, we will be able to fix a lot of things. I think being part of that is very, very exciting.

ET: Sachin?

Bansal: When the world started healing from all the wars there were some countries that had a great opening balance and some with a bad opening balance.

India was one of those with a bad opening balance. We missed quite a bit of the revolution that happened since. [Now,] we are building all these internet companies.

ET [To Kant]: How do you keep your motivation going?

Kant: My motivation is that India is still very, very complex, very complicated.

We in India need to scrap a lot of paper work, procedures, rules, regulation acts. Just scrap them wholesale, make India the easiest and simplest place to do business in, so that young entrepreneurs like all these rock stars can flourish and grow.